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Future rate prediction (SOFR/Treasury)
%
Added to index rate after fixed period
Save $14,045 in first 5 years
Fixed vs ARM initial payments
6.75% for entire 30 years
✓ Predictable payments
✓ No rate risk
✓ Peace of mind
5.75% for first 5 years
✓ Lower initial payment
✓ Good if moving/refi soon
⚠️ Rate adjusts after 5 years
That's $14,045 over the 5-year fixed period
How payments may change over time (expected scenario)
What happens if rates rise?
Fixed Payment (guaranteed)
$2,335
ARM Initial Payment
$2,101
ARM Worst Case
$3,093
Key factors to consider
• You plan to move within 5 years
• You expect to refinance before adjustments
• You expect rates to stay flat or drop
• You can handle payment increases
• You plan to stay long-term
• You value payment predictability
• Rates are historically low
• Your budget is tight
What these numbers mean for you
Fixed rate: $2,335/month for 30 years - predictable and stable
ARM: Starts at $2,101/month, saves $14,045 in first 5 years
Expected case: Fixed saves $42,181 total (assumes 5% index)
Worst case: ARM payment could reach $3,093/month if rates spike
Short fixed period means rate risk comes sooner. Only take ARM if you're confident about moving or refinancing
The 5/1 ARM saves $234/month initially ($14,045 over 5 years). However, if rates rise as expected, the fixed rate saves $42,181 over the life of the loan.
Here are the exact formulas behind your numbers. No black boxes — just math.
Fixed Monthly Payment
ARM Initial Payment
ARM Adjusted Payment
Initial Monthly Savings
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